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Four months have passed since the start of the impressive cascade of drops in the Spanish pig price. The price has fallen below the cost of production. This is the case in all EU member states (with the well-known exception of Italy).
We are in a critical market situation throughout the EU. It does not look like things will change until February next year. There will be many weeks of losses for pig farmers.
Many questions arise about the viability of some pig farms in different countries. The EU is the world leader in rules and regulations governing pig farming, and ultimately, so many regulations and difficulties end up taking their toll by making production more expensive.
In Brazil, our main and most formidable competitor at present, producing a pig costs less than one euro per kilogram live weight. It is impossible for Europe to compete with these costs. In an increasingly globalized world, all market players can reach almost anywhere. This situation is irreversible and can only be mitigated by protectionist policies that individual states may decide to implement. China is the latest and most significant example.
Brazil is eating into our market share in all Asian markets; there is no turning back, and we have no choice but to accept this fact. Other South American countries are showing significant growth in their pork production: they will undoubtedly seek triumphs in exports to third countries, which means that things will become even more difficult for Spanish producers (and, by extension, for European producers).
The future of Spanish pork lies mainly within the borders of the EU. This is a concept we have repeated several times. For us, it is an absolute truth.
Among the common traits found in successful entrepreneurs in the Spanish swine industry (as a whole), we would highlight a few that are especially significant:
- An innate instinct for saving unnecessary costs.
- A keen eye for eliminating inefficiencies in their companies.
- A tireless attitude of persisting and insisting until objectives are achieved.
- An open mind: there is always something to learn.
- A remarkable ability to engage in dialogue with competitors.
- An extraordinary capacity for reasoning; decisions are made with the head, not the heart.
- Sufficient perspective to correctly judge a changing environment.
In practice, this way of seeing things has resulted in the Spanish swine industry currently being the most efficient in the EU. The incredible growth in Spanish production over the last three decades attests to this and has taken place thanks to the characteristics listed above. These are good cards to play as we face the future. Let this reflection serve as a touch of optimism for the future in these turbulent times.
A week ago, everything pointed to the Spanish hog price being very close to bottoming out, with the low predicted at €1.35/kg live weight. Last Wednesday, Germany unexpectedly dropped carcass prices by 10 cents, and this forecast collapsed.
Yesterday's drop (down 4 cents) can be interpreted as a reaction to what has happened in Central Europe: Denmark, the Netherlands, and Germany have taken the lead, indicating that hog prices should fall further, and that is where we are now. There will probably be one or two more drops... At the moment, Spain's price is above that of the countries mentioned. A drop of 4 cents at this stage is a clear sign that something is changing profoundly.
Slaughterhouses explain that exporting to Asia is currently a Herculean task due to its difficulty. The supply of live animals is very high, and average carcass weights are the highest ever recorded week after week. Weekly slaughter numbers are very high and reaching levels rarely seen before. The situation is very delicate, and no improvement is expected until well into February.
We are inevitably heading towards average carcass weights higher than anything we have ever seen before. The average weight after the holidays will probably be between 98 and 99 kilograms. The variation in weights within the same batch will mean that some carcasses will weigh more than 115 kilograms... Commercially speaking, this is a serious problem (the pieces are too large and customers reject them) that needs to be solved. Surely the only antidote would be more exhaustive on-farm control of the live weights being loaded. Selection represents an added cost, but we see no other alternative.
The current situation is critical and distressing, both in Spain and in the rest of the EU Member States. There is no choice but to endure and resist, hoping that the situation will improve. In the medium term, such ruinous prices will lead to business closures, and the market will regulate itself. But... none of this will happen immediately. The resilience of the European swine industry is being put to the test, and in a big way!
It is very likely that we are living through and experiencing a profound cyclical change.
To conclude today, we would like to quote a magnificent phrase from the great Horace (poet in ancient Rome): “Adversity has the effect of eliciting talents which, in prosperous circumstances, would have lain dormant.”
Guillem Burset
